CHUBB LTD, 10-Q filed on 10/28/2021
Quarterly Report
v3.21.2
Document and Entity Information - SFr / shares
9 Months Ended
Sep. 30, 2021
Oct. 15, 2021
Dec. 31, 2020
Document Type 10-Q    
Document Period End Date Sep. 30, 2021    
Document Quarterly Report true    
Document Transition Report false    
Entity Registrant Name CHUBB LIMITED    
Entity Central Index Key 0000896159    
Document Fiscal Year Focus 2021    
Document Fiscal Period Focus Q3    
Entity File Number 1-11778    
Entity Incorporation, State or Country Code V8    
Entity Tax Identification Number 98-0091805    
Entity Address, Address Line One Baerengasse 32    
Entity Address, City or Town Zurich    
Entity Address, Country CH    
Entity Address, Postal Zip Code 8001    
Country Region 41    
City Area Code (0)43    
Local Phone Number 456 76 00    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Shell Company false    
Entity Emerging Growth Company false    
Common Shares, par value SFr 24.15   SFr 24.15
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Common Shares Outstanding   430,741,280  
INA Senior Notes Due March 2038 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 2.50% Senior Notes due 2038    
Trading Symbol CB/38A    
Security Exchange Name NYSE    
INA Senior Notes Due December 2029 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 0.875% Senior Notes due 2029    
Trading Symbol CB/29A    
Security Exchange Name NYSE    
INA Senior Notes Due June 2031 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 1.40% Senior Notes due 2031    
Trading Symbol CB/31    
Security Exchange Name NYSE    
INA Senior Notes Due March 2028 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 1.55% Senior Notes due 2028    
Trading Symbol CB/28    
Security Exchange Name NYSE    
INA Senior Notes Due June 2027 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 0.875% Senior Notes due 2027    
Trading Symbol CB/27    
Security Exchange Name NYSE    
INA Senior Notes Due December 2024 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 0.30% Senior Notes due 2024    
Trading Symbol CB/24A    
Security Exchange Name NYSE    
Common Class A [Member]      
Title of 12(b) Security Common Shares, par value CHF 24.15 per share    
Trading Symbol CB    
Security Exchange Name NYSE    
v3.21.2
Consolidated Balance Sheets - USD ($)
$ in Millions
Sep. 30, 2021
Dec. 31, 2020
Assets    
Fixed maturities available for sale, at fair value, net of valuation allowance - $12 and $20 (amortized cost – $89,335 and $85,188) $ 92,685 $ 90,699
Fixed maturities held to maturity, net carrying value 10,515 11,653
Equity securities, at fair value 4,557 4,027
Short-term investments 3,529 4,345
Other investments, at fair value 10,843 7,945
Total investments 122,129 118,669
Cash 1,620 1,747
Restricted cash 176 89
Securities lending collateral 2,368 1,844
Accrued investment income 825 867
Insurance and reinsurance balances receivable, net of valuation allowance - $42 and $44 11,723 10,480
Reinsurance recoverable on losses and loss expenses, net of valuation allowance - $325 and $314 16,648 15,592
Reinsurance recoverable on policy benefits 206 206
Deferred policy acquisition costs 5,532 5,402
Value of business acquired 245 263
Goodwill 15,387 15,400
Other intangible assets 5,578 5,811
Prepaid reinsurance premiums 3,092 2,769
Investments in partially-owned insurance companies 3,006 2,813
Other assets 10,519 8,822
Total assets 199,054 190,774
Liabilities    
Unpaid losses and loss expenses 72,631 67,811
Unearned premiums 19,519 17,652
Future policy benefits 5,890 5,713
Insurance and reinsurance balances payable 7,104 6,708
Securities lending payable 2,368 1,844
Accounts payable, accrued expenses, and other liabilities 15,470 14,052
Deferred tax liabilities 217 892
Repurchase agreements 1,406 1,405
Long-term debt 14,823 14,948
Trust preferred securities 308 308
Total liabilities 139,736 131,333
Commitments and contingencies (refer to Note 7)
Shareholders’ equity    
Common Shares (CHF 24.15 par value; 474,021,114 and 477,605,264 shares issued; 430,876,252 and 450,732,625 shares outstanding) 10,985 11,064
Common Shares in treasury (43,144,862 and 26,872,639 shares) (6,621) (3,644)
Additional Paid in Capital, Common Stock 8,752 9,815
Retained earnings 45,224 39,337
Accumulated other comprehensive income (AOCI) 978 2,869
Total shareholders’ equity 59,318 59,441
Total liabilities and shareholders’ equity $ 199,054 $ 190,774
v3.21.2
Statement of Financial Position (Parentheticals)
$ in Millions
Sep. 30, 2021
USD ($)
shares
Dec. 31, 2020
USD ($)
shares
Statement of Financial Position [Abstract]    
Available for sale, at amortized cost $ 89,335 $ 85,188
Debt Securities, Available-for-sale, Allowance for Credit Loss 12 20
Held to maturity, Fair Value 11,119 12,510
Debt Securities, Held-to-maturity, Allowance for Credit Loss 35 44
short-term investments amortized cost 3,529 4,349
Premium Receivable, Allowance for Credit Loss 42 44
Reinsurance Recoverable, Allowance for Credit Loss $ 325 $ 314
Common Shares in treasury, shares | shares 43,144,862 26,872,639
Common Shares, shares issued | shares 474,021,114 477,605,264
Common Shares, shares outstanding | shares 430,876,252 450,732,625
v3.21.2
Consolidated Statements Of Operations and Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Revenues        
Net premiums written $ 10,510 $ 9,078 $ 28,718 $ 25,410
Increase in unearned premiums (510) (313) (1,684) (723)
Net premiums earned 10,000 8,765 27,034 24,687
Net investment income 866 840 2,613 2,528
Realized Investment Gains (Losses) (21) (141) 833 (1,069)
Total revenues 10,845 9,464 30,480 26,146
Expenses        
Losses and loss expenses 6,629 5,835 16,688 16,897
Policy benefits 151 198 503 550
Policy acquisition costs 1,778 1,645 5,141 4,853
Administrative expenses 806 733 2,325 2,201
Interest expense 122 130 366 390
Other (income) expense (763) (485) (2,030) (372)
Amortization of purchased intangibles 71 72 216 217
Total expenses 8,794 8,128 23,209 24,736
Income before income tax 2,051 1,336 7,271 1,410
Income tax expense (includes $(3), $7, $(5), and $(35) on unrealized gains and losses reclassified from AOCI) 218 142 873 295
Net income 1,833 1,194 6,398 1,115
Other comprehensive income (loss)        
Unrealized appreciation (depreciation) (564) 687 (2,151) 1,456
Reclassification adjustment for net realized (gains) losses included in net income 10 (49) (26) 303
Unrealized appreciation (Depreciation) after reclassification adjustment (554) 638 (2,177) 1,759
Change in:        
Cumulative foreign currency translation adjustment (414) 246 (84) (168)
Postretirement benefit liability adjustment 4 (23) (33) (59)
Other comprehensive income (loss), before income tax (964) 861 (2,294) 1,532
Income tax (expense) benefit related to OCI items 120 (103) 403 (295)
Other comprehensive income (loss) (844) 758 (1,891) 1,237
Comprehensive income $ 989 $ 1,952 $ 4,507 $ 2,352
Earnings per share        
Basic earnings per share $ 4.21 $ 2.64 $ 14.42 $ 2.47
Diluted earnings per share $ 4.18 $ 2.63 $ 14.33 $ 2.46
v3.21.2
Consolidated Statements of Operations and Comprehensive Income (Parentheticals) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Income Statement [Abstract]        
Total net realized gains (losses) reclassified from AOCI $ (10) $ 49 $ 26 $ (303)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax $ (3) $ 7 $ (5) $ (35)
v3.21.2
Consolidated Statements Of Shareholders' Equity - USD ($)
$ in Millions
Total
Common Stock [Member]
Common shares in treasury [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Retained Earnings [Member]
Cumulative Effect, Period of Adoption, Adjustment
Retained Earnings [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Cumulative Foreign Currency Translation Adjustment [Member]
Postretirement Benefit Liability Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Balance - beginning of period at Dec. 31, 2019   $ 11,121 $ (3,754) $ 11,203 $ 36,142 $ (72) $ 36,070 $ 2,543 $ (1,939) $ 15  
Common Shares repurchased     (326)                
Treasury Stock, Retired, Cost Method, Amount   (57) 323   (266)            
Net shares redeemed under employee share-based compensation plans     216 (195)              
Exercise of stock options       (30)              
Share-based compensation expense       183              
Adjustments to Additional Paid in Capital, Dividends in Excess of Retained Earnings       (1,046)              
Net income (loss) $ 1,115       1,115            
Funding of dividends declared from Additional paid-in capital         1,046            
Dividends declared on Common Shares         (1,046)            
Change in period, before reclassification from AOCI, net of income tax (expense) benefit of $101, $(102), $395 and $(300)               1,156      
Amounts reclassified from AOCI, net of income tax (expense) benefit of $(3), $7, $(5), $(35)               268      
Change in period, net of income tax (expense) benefit of $98, $(95), $390 and $(335)               1,424      
Change in period, net of income tax (expense) benefit of $23, $(13), $7 and $27                 (141)    
Change in period, net of income tax (expense) benefit of $(1), $5, $6 and $13                   (46)  
Balance - end of period at Sep. 30, 2020 56,413 11,064 (3,541) 10,115 36,919     3,967 (2,080) (31) $ 1,856
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax (35)             (35)      
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax               (335)      
OCI, Debt Securities, Available-for-Sale, Gain (Loss), before Adjustment, Tax               (300)      
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax                 27    
Pension liability adjustment, Change in period, income tax (expense) benefit                   13  
Balance - beginning of period at Jun. 30, 2020   11,121 (3,866) 10,416 35,991 0 35,991 3,424 (2,313) (13)  
Common Shares repurchased     0                
Treasury Stock, Retired, Cost Method, Amount   (57) 323   (266)            
Net shares redeemed under employee share-based compensation plans     2 (6)              
Exercise of stock options       (1)              
Share-based compensation expense       59              
Adjustments to Additional Paid in Capital, Dividends in Excess of Retained Earnings       (353)              
Net income (loss) 1,194       1,194            
Funding of dividends declared from Additional paid-in capital         353            
Dividends declared on Common Shares         (353)            
Change in period, before reclassification from AOCI, net of income tax (expense) benefit of $101, $(102), $395 and $(300)               585      
Amounts reclassified from AOCI, net of income tax (expense) benefit of $(3), $7, $(5), $(35)               (42)      
Change in period, net of income tax (expense) benefit of $98, $(95), $390 and $(335)               543      
Change in period, net of income tax (expense) benefit of $23, $(13), $7 and $27                 233    
Change in period, net of income tax (expense) benefit of $(1), $5, $6 and $13                   (18)  
Balance - end of period at Sep. 30, 2020 56,413 11,064 (3,541) 10,115 36,919     3,967 (2,080) (31) 1,856
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax 7             7      
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax               (95)      
OCI, Debt Securities, Available-for-Sale, Gain (Loss), before Adjustment, Tax               (102)      
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax                 (13)    
Pension liability adjustment, Change in period, income tax (expense) benefit                   5  
Balance - beginning of period at Dec. 31, 2020 59,441 11,064 (3,644) 9,815 39,337 0 39,337 4,673 (1,637) (167)  
Common Shares repurchased     (3,956)                
Treasury Stock, Retired, Cost Method, Amount   (79) 590   (511)            
Net shares redeemed under employee share-based compensation plans     389 (184)              
Exercise of stock options       (45)              
Share-based compensation expense       216              
Adjustments to Additional Paid in Capital, Dividends in Excess of Retained Earnings       (1,050)              
Net income (loss) 6,398       6,398            
Funding of dividends declared from Additional paid-in capital         1,050            
Dividends declared on Common Shares         (1,050)            
Change in period, before reclassification from AOCI, net of income tax (expense) benefit of $101, $(102), $395 and $(300)               (1,756)      
Amounts reclassified from AOCI, net of income tax (expense) benefit of $(3), $7, $(5), $(35)               (31)      
Change in period, net of income tax (expense) benefit of $98, $(95), $390 and $(335)               (1,787)      
Change in period, net of income tax (expense) benefit of $23, $(13), $7 and $27                 (77)    
Change in period, net of income tax (expense) benefit of $(1), $5, $6 and $13                   (27)  
Balance - end of period at Sep. 30, 2021 59,318 10,985 (6,621) 8,752 45,224     2,886 (1,714) (194) 978
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax $ (5)             (5)      
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax               390      
OCI, Debt Securities, Available-for-Sale, Gain (Loss), before Adjustment, Tax               395      
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax                 7    
Pension liability adjustment, Change in period, income tax (expense) benefit                   6  
Accounting Standards Update [Extensible List] Accounting Standards Update 2016-13 [Member]                    
Balance - beginning of period at Jun. 30, 2021   11,064 (5,772) 9,046 43,902 $ 0 $ 43,902 3,342 (1,323) (197)  
Common Shares repurchased     (1,516)                
Treasury Stock, Retired, Cost Method, Amount   (79) 590   (511)            
Net shares redeemed under employee share-based compensation plans     77 (2)              
Exercise of stock options       (15)              
Share-based compensation expense       69              
Adjustments to Additional Paid in Capital, Dividends in Excess of Retained Earnings       (346)              
Net income (loss) $ 1,833       1,833            
Funding of dividends declared from Additional paid-in capital         346            
Dividends declared on Common Shares         (346)            
Change in period, before reclassification from AOCI, net of income tax (expense) benefit of $101, $(102), $395 and $(300)               (463)      
Amounts reclassified from AOCI, net of income tax (expense) benefit of $(3), $7, $(5), $(35)               7      
Change in period, net of income tax (expense) benefit of $98, $(95), $390 and $(335)               (456)      
Change in period, net of income tax (expense) benefit of $23, $(13), $7 and $27                 (391)    
Change in period, net of income tax (expense) benefit of $(1), $5, $6 and $13                   3  
Balance - end of period at Sep. 30, 2021 59,318 $ 10,985 $ (6,621) $ 8,752 $ 45,224     2,886 (1,714) (194) $ 978
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax $ (3)             (3)      
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax               98      
OCI, Debt Securities, Available-for-Sale, Gain (Loss), before Adjustment, Tax               $ 101      
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax                 $ 23    
Pension liability adjustment, Change in period, income tax (expense) benefit                   $ (1)  
v3.21.2
Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Cash flows from operating activities    
Net income (loss) $ 6,398 $ 1,115
Adjustments to reconcile net income to net cash flows from operating activities    
Net realized (gains) losses (833) 1,069
Amortization of premiums/discounts on fixed maturities 242 280
Amortization of purchased intangibles 216 217
Deferred income taxes (268) (287)
Unpaid losses and loss expenses 4,907 5,112
Unearned premiums 2,032 881
Future policy benefits 163 138
Insurance and reinsurance balances payable 408 280
Accounts payable, accrued expenses, and other liabilities 45 190
Income taxes payable 212 (95)
Insurance and reinsurance balances receivable (1,257) (324)
Reinsurance recoverable (1,071) (496)
Deferred policy acquisition costs (208) (77)
Other (2,437) (762)
Net cash flows from operating activities 8,549 7,241
Cash flows from investing activities    
Purchases of fixed maturities available for sale (23,028) (20,793)
Purchases of fixed maturities held to maturity (434) (42)
Purchases of equity securities 799 3,622
Sales of fixed maturities available for sale 5,225 9,537
Sales of equity securities 750 1,526
Maturities and redemptions of fixed maturities available for sale 13,710 8,709
Maturities and redemptions of fixed maturities held to maturity 1,488 841
Net change in short-term investments 809 (434)
Net derivative instruments settlements (66) (74)
Private equity contribution (1,872) (1,056)
Private equity distribution 891 588
Payment, including deposit, for Huatai Group Interest (208) (1,557)
Other (217) (352)
Net cash flows used for investing activities (3,751) (6,729)
Cash flows from financing activities    
Dividends paid on Common Shares (1,056) (1,035)
Common Shares repurchased (3,941) (333)
Proceeds from Issuance of Long-term Debt 0 988
Proceeds from issuance of repurchase agreements 1,405 1,402
Repayment of repurchase agreements (1,405) (1,402)
Proceeds from share-based compensation plans 239 77
Policyholder contract deposits and other 365 322
Policyholder contract withdrawals and other (331) (253)
Proceeds from (Payments for) Other Financing Activities (81) 0
Net cash flows used for financing activities (4,805) (234)
Effect of foreign currency rate changes on cash and restricted cash (33) (51)
Net increase (decrease) in cash and restricted cash (40) 227
Cash and restricted cash - beginning of period 1,836 1,646
Cash and restricted cash - end of period 1,796 1,873
Supplemental cash flow information    
Taxes paid 931 668
Interest paid 316 323
Debt Securities, Held-to-maturity, Allowance for Credit Loss $ 35 $ 45
v3.21.2
General
9 Months Ended
Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
General General
a) Basis of presentation
Chubb Limited is a holding company incorporated in Zurich, Switzerland. Chubb Limited, through its subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. Our results are reported through the following business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. Refer to Note 12 for additional information.

The interim unaudited consolidated financial statements, which include the accounts of Chubb Limited and its subsidiaries (collectively, Chubb, we, us, or our), have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and, in the opinion of management, reflect all adjustments necessary for a fair statement of the results and financial position for such periods. All significant intercompany accounts and transactions, including internal reinsurance transactions, have been eliminated.

The results of operations and cash flows for any interim period are not necessarily indicative of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2020 Form 10-K.

b) Restricted cash
Restricted cash in the Consolidated balance sheets represents amounts held for the benefit of third parties and is legally or contractually restricted as to withdrawal or usage. Amounts include deposits with U.S. and non-U.S. regulatory authorities, trust funds set up for the benefit of ceding companies, and amounts pledged as collateral to meet financing arrangements.

The following table provides a reconciliation of cash and restricted cash reported within the Consolidated balance sheets that total to the amounts shown in the Consolidated statements of cash flows:
September 30December 31
(in millions of U.S. dollars)20212020
Cash$1,620 $1,747 
Restricted cash176 89 
Total cash and restricted cash shown in the Consolidated statements of cash flows$1,796 $1,836 

c) Goodwill
During the nine months ended September 30, 2021, Goodwill decreased $13 million, reflecting the impact of foreign exchange.

d) Accounting guidance not yet adopted
Targeted Improvements to the Accounting for Long-Duration Contracts
In August 2018, the FASB issued guidance to improve the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The amendments in this update require more frequent updating of assumptions and a standardized discount rate for the future policy benefit liability, a requirement to use the fair value measurement model for policies with market risk benefits, simplified amortization of deferred acquisition costs, and enhanced disclosures. This standard will be effective in the first quarter of 2023 with early adoption permitted. We are currently assessing the effect of adopting this guidance on our financial condition and results of operations. We will be better able to quantify the effect of adopting this standard as we progress in our implementation process and draw nearer to the date of adoption.
v3.21.2
Acquisitions
9 Months Ended
Sep. 30, 2021
Business Combinations [Abstract]  
Acquisitions Acquisitions
Cigna’s Life and Accident and Health (A&H) Insurance Business in Asia-Pacific Markets
On October 7, 2021, we entered into a definitive agreement to acquire the life and non-life insurance companies that house the personal accident, supplemental health and life insurance business of Cigna in seven Asia-Pacific markets, including Korea, Taiwan, New Zealand, Thailand, Hong Kong and Indonesia and its interest in a joint venture in Turkey, for $5.75 billion in cash. The transaction is expected to be completed in 2022. The timing of completion is subject to required regulatory approvals and customary closing conditions.

Huatai Group
Chubb maintains a direct investment in Huatai Insurance Group Co., Ltd. (Huatai Group). Huatai Group is the parent company of, and owns 100 percent of, Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C), approximately 80 percent of Huatai Life Insurance Co., Ltd. (Huatai Life), and approximately 82 percent of Huatai Asset Management Co., Ltd. (collectively, Huatai). Huatai Group's insurance operations have more than 600 branches and 17 million customers in China. In November 2020, we completed the purchase of an incremental 0.9 percent ownership interest in Huatai Group for approximately $65 million, which was paid in January 2021.

As of September 30, 2021, Chubb's aggregate ownership interest in Huatai Group was approximately 47.1 percent. Chubb applies the equity method of accounting to its investment in Huatai Group by recording its share of net income or loss in Other (income) expense in the Consolidated statements of operations. In 2019, Chubb entered into an agreement to acquire an additional 7.1 percent ownership interest in Huatai Group. In July 2021, Chubb signed an agreement of intent to purchase an additional 6.4 percent ownership interest in Huatai Group. In connection with the agreement, Chubb paid a deposit of approximately $143 million. The purchase of the additional ownership interests is contingent upon important conditions. As Chubb’s ownership interest increases, we will continue to evaluate the appropriateness of consolidation accounting in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, Consolidation, and other applicable regulations.
v3.21.2
Investments
9 Months Ended
Sep. 30, 2021
Investments, Debt and Equity Securities [Abstract]  
Investments Investments
a) Fixed maturities
September 30, 2021Amortized
Cost
Valuation AllowanceGross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair
Value
(in millions of U.S. dollars)
Available for sale
U.S. Treasury / Agency$2,172 $ $120 $(5)$2,287 
Non-U.S.24,988 (6)1,139 (194)25,927 
Corporate and asset-backed securities37,283 (6)1,596 (157)38,716 
Mortgage-backed securities19,333  695 (65)19,963 
Municipal5,559  236 (3)5,792 
$89,335 $(12)$3,786 $(424)$92,685 
Amortized
Cost
Valuation AllowanceNet Carrying ValueGross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair
Value
Held to maturity
U.S. Treasury / Agency$1,209 $ $1,209 $38 $ $1,247 
Non-U.S.1,259 (5)1,254 76  1,330 
Corporate and asset-backed securities2,079 (28)2,051 209  2,260 
Mortgage-backed securities1,771 (1)1,770 99 (1)1,868 
Municipal4,232 (1)4,231 183  4,414 
$10,550 $(35)$10,515 $605 $(1)$11,119 
December 31, 2020Amortized
Cost
Valuation AllowanceGross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair
Value
(in millions of U.S. dollars)
Available for sale
U.S. Treasury / Agency$2,471 $— $199 $— $2,670 
Non-U.S.24,594 (6)1,808 (42)26,354 
Corporate and asset-backed securities34,095 (14)2,322 (72)36,331 
Mortgage-backed securities17,456 — 1,022 (8)18,470 
Municipal6,572 — 304 (2)6,874 
$85,188 $(20)$5,655 $(124)$90,699 
Amortized
Cost
Valuation AllowanceNet Carrying ValueGross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair
Value
Held to maturity
U.S. Treasury / Agency$1,392 $— $1,392 $60 $— $1,452 
Non-U.S.1,295 (7)1,288 118 (1)1,405 
Corporate and asset-backed securities2,185 (35)2,150 288 — 2,438 
Mortgage-backed securities2,000 (1)1,999 148 (1)2,146 
Municipal4,825 (1)4,824 245 — 5,069 
$11,697 $(44)$11,653 $859 $(2)$12,510 

The following table presents the amortized cost of our Held to Maturity (HTM) securities according to S&P rating:
September 30, 2021December 31, 2020
(in millions of U.S. dollars, except for percentages)Amortized cost% of TotalAmortized cost% of Total
AAA$2,216 21 %$2,511 22 %
AA5,479 52 %6,193 53 %
A2,011 19 %2,138 18 %
BBB815 8 %826 %
BB28  %28 — %
Other1  %— %
Total$10,550 100 %$11,697 100 %
The following table presents fixed maturities by contractual maturity:
September 30December 31
 20212020
(in millions of U.S. dollars)Net Carrying ValueFair ValueNet Carrying ValueFair Value
Available for sale
Due in 1 year or less$4,568 $4,568 $4,760 $4,760 
Due after 1 year through 5 years25,747 25,747 26,227 26,227 
Due after 5 years through 10 years28,117 28,117 27,232 27,232 
Due after 10 years14,290 14,290 14,010 14,010 
72,722 72,722 72,229 72,229 
Mortgage-backed securities19,963 19,963 18,470 18,470 
$92,685 $92,685 $90,699 $90,699 
Held to maturity
Due in 1 year or less$947 $954 $1,231 $1,240 
Due after 1 year through 5 years3,666 3,792 3,592 3,760 
Due after 5 years through 10 years2,498 2,627 3,029 3,228 
Due after 10 years1,634 1,878 1,802 2,136 
8,745 9,251 9,654 10,364 
Mortgage-backed securities1,770 1,868 1,999 2,146 
$10,515 $11,119 $11,653 $12,510 

Expected maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties. 

b) Gross unrealized loss
Fixed maturities in an unrealized loss position at September 30, 2021 comprised both investment grade and below investment grade securities for which fair value declined primarily due to widening credit spreads since the date of purchase.

The following tables present, for Available for Sale (AFS) fixed maturities in an unrealized loss position (including securities on loan) that are not deemed to have expected credit losses, the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
0 – 12 MonthsOver 12 MonthsTotal
September 30, 2021Fair ValueGross
Unrealized
Loss
Fair ValueGross
Unrealized
Loss
Fair ValueGross
Unrealized
Loss
(in millions of U.S. dollars)
U.S. Treasury / Agency$231 $(5)$ $ $231 $(5)
Non-U.S.5,704 (147)780 (40)6,484 (187)
Corporate and asset-backed securities6,686 (124)662 (20)7,348 (144)
Mortgage-backed securities5,948 (61)157 (4)6,105 (65)
Municipal
239 (2)8 (1)247 (3)
Total AFS fixed maturities $18,808 $(339)$1,607 $(65)$20,415 $(404)
0 – 12 MonthsOver 12 MonthsTotal
December 31, 2020Fair ValueGross
Unrealized
Loss
Fair ValueGross
Unrealized
Loss
Fair ValueGross
Unrealized
Loss
(in millions of U.S. dollars)
Non-U.S.$1,628 $(35)$114 $(5)$1,742 $(40)
Corporate and asset-backed securities2,212 (33)593 (14)2,805 (47)
Mortgage-backed securities875 (6)35 (2)910 (8)
Municipal
40 (1)16 (1)56 (2)
Total AFS fixed maturities$4,755 $(75)$758 $(22)$5,513 $(97)

c) Net realized gains (losses)
The following table presents the components of Net realized gains (losses):
Three Months EndedNine Months Ended
September 30September 30
(in millions of U.S. dollars)2021202020212020
Fixed maturities:
Gross realized gains$27 $50 $120 $195 
Gross realized losses(27)(32)(99)(331)
Net (provision for) recovery of expected credit losses1 42 17 (4)
Impairment (1)
(11)(11)(12)(163)
Total fixed maturities $(10)$49 $26 $(303)
Equity securities(42)— 475 119 
Other investments11 31 111 (71)
Foreign exchange106 (222)85 (351)
Investment and embedded derivative instruments(9)9 38 
Fair value adjustments on insurance derivative(59)46 252 (426)
S&P futures(4)(52)(112)(30)
Other derivative instruments(10)(8)(2)
Other(4)(3)(5)(43)
Net realized gains (losses) (pre-tax)$(21)$(141)$833 $(1,069)
(1)Relates to certain securities we intended to sell and securities written to market entering default.

Realized gains and losses from Equity securities and Other investments from the table above include sales of securities and unrealized gains and losses from fair value changes as follows:
Three Months Ended
September 30
20212020
(in millions of U.S. dollars)Equity SecuritiesOther InvestmentsTotalEquity SecuritiesOther InvestmentsTotal
Net gains (losses) recognized during the period$(42)$11 $(31)$— $31 $31 
Less: Net gains recognized from sales of securities19  19 34 — 34 
Unrealized gains (losses) recognized for securities still held at reporting date$(61)$11 $(50)$(34)$31 $(3)
Nine Months Ended
September 30
20212020
(in millions of U.S. dollars)Equity SecuritiesOther InvestmentsTotalEquity SecuritiesOther InvestmentsTotal
Net gains (losses) recognized during the period$475 $111 $586 $119 $(71)$48 
Less: Net gains recognized from sales of securities109  109 197 — 197 
Unrealized gains (losses) recognized for securities still held at reporting date$366 $111 $477 $(78)$(71)$(149)

The following table presents a roll-forward of valuation allowance for expected credit losses on fixed maturities:
Three Months EndedNine Months Ended
September 30September 30
(in millions of U.S. dollars)2021202020212020
Available for sale
Valuation allowance for expected credit losses - beginning of period$11 $69 $20 $— 
Impact of adoption of new accounting guidance —  25 
Provision for expected credit loss3 8 183 
Initial allowance for purchased securities with credit deterioration —  
Write-offs charged against the expected credit loss —  (5)
Recovery of expected credit loss(2)(40)(16)(174)
Valuation allowance for expected credit losses - end of period$12 $34 $12 $34 
Held to maturity
Valuation allowance for expected credit losses - beginning of period$37 $51 $44 $— 
Impact of adoption of new accounting guidance —  44 
Provision for expected credit loss  
Recovery of expected credit loss(2)(8)(9)(8)
Valuation allowance for expected credit losses - end of period$35 $45 $35 $45 
d) Alternative investments
Alternative investments include partially-owned investment companies, investment funds, and limited partnerships measured at fair value using net asset value (NAV) as a practical expedient. The following table presents, by investment category, the expected liquidation period, fair value, and maximum future funding commitments of alternative investments:
September 30December 31
 Expected
Liquidation
Period of Underlying Assets
20212020
(in millions of U.S. dollars)Fair
Value
Maximum
Future Funding
Commitments
Fair
Value
Maximum
Future Funding
Commitments
Financial
2 to 10 Years
$1,064 $309 $673 $237 
Real Assets
2 to 11 Years
1,092 772 805 598 
Distressed
2 to 8 Years
568 813 358 970 
Private Credit
3 to 8 Years
82 279 88 270 
Traditional
2 to 14 Years
6,616 4,958 4,519 1,125 
Vintage
1 to 2 Years
64  73 — 
Investment fundsNot Applicable282  254 — 
$9,768 $7,131 $6,770 $3,200 

Included in all categories in the above table, except for Investment funds, are investments for which Chubb will never have the contractual option to redeem but receives distributions based on the liquidation of the underlying assets. Further, for all categories except for Investment funds, Chubb does not have the ability to sell or transfer the investments without the consent from the general partner of individual funds.
Investment Category: Consists of investments in private equity funds:
Financialtargeting financial services companies, such as financial institutions and insurance services worldwide
Real Assetstargeting investments related to hard, physical assets, such as real estate, infrastructure and natural resources
Distressedtargeting distressed corporate debt/credit and equity opportunities in the U.S.
Private Credittargeting privately originated corporate debt investments, including senior secured loans and subordinated bonds
Traditionalemploying traditional private equity investment strategies, such as buyout and growth equity globally
Vintagefunds where the initial fund term has expired

Investment funds employ various investment strategies, such as long/short equity and arbitrage/distressed. Included in this category are investments for which Chubb has the option to redeem at agreed upon value as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investment fund investments may be redeemed monthly, quarterly, semi-annually, or annually. If Chubb wishes to redeem an investment fund investment, it must first determine if the investment fund is still in a lock-up period (a time when Chubb cannot redeem its investment so that the investment fund manager has time to build the portfolio). If the investment fund is no longer in its lock-up period, Chubb must then notify the investment fund manager of its intention to redeem by the notification date prescribed by the subscription agreement. Subsequent to notification, the investment fund can redeem Chubb’s investment within several months of the notification. Notice periods for redemption of the investment funds are up to 270 days. Chubb can redeem its investment funds without consent from the investment fund managers.

e) Restricted assets
Chubb is required to maintain assets on deposit with various regulatory authorities to support its insurance and reinsurance operations. These requirements are generally promulgated in the statutory regulations of the individual jurisdictions. The assets on deposit are available to settle insurance and reinsurance liabilities. Chubb is also required to restrict assets pledged under repurchase agreements, which represent Chubb's agreement to sell securities and repurchase them at a future date for a predetermined price. We use trust funds in certain large reinsurance transactions where the trust funds are set up for the benefit of the ceding companies and generally take the place of letter of credit (LOC) requirements. We have investments in segregated portfolios primarily to provide collateral or guarantees for LOC and derivative transactions. Included in restricted assets at
September 30, 2021 and December 31, 2020 are investments, primarily fixed maturities, totaling $18.82 billion and $19.61 billion, respectively, and cash of $176 million and $89 million, respectively.
The following table presents the components of restricted assets:
September 30December 31
(in millions of U.S. dollars)20212020
Trust funds$11,669 $12,305 
Deposits with U.S. regulatory authorities2,418 2,438 
Deposits with non-U.S. regulatory authorities2,858 2,905 
Assets pledged under repurchase agreements1,425 1,462 
Other pledged assets632 584 
Total$19,002 $19,694 
v3.21.2
Fair value measurements
9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Fair value measurements Fair value measurements
a) Fair value hierarchy
Fair value of financial assets and financial liabilities is estimated based on the framework established in the fair value accounting guidance. The guidance defines fair value as the price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants and establishes a three-level valuation hierarchy based on the reliability of the inputs. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data.

The three levels of the hierarchy are as follows:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets;
Level 2 – Includes, among other items, inputs other than quoted prices that are observable for the asset or liability such as
interest rates and yield curves, quoted prices for similar assets and liabilities in active markets, and quoted prices for identical or similar assets and liabilities in markets that are not active; and
Level 3 – Inputs that are unobservable and reflect management’s judgments about assumptions that market participants
would use in pricing an asset or liability.

We categorize financial instruments within the valuation hierarchy at the balance sheet date based upon the lowest level of inputs that are significant to the fair value measurement.

We use pricing services to obtain fair value measurements for the majority of our investment securities. Based on management’s understanding of the methodologies used, these pricing services only produce an estimate of fair value if there is observable market information that would allow them to make a fair value estimate. Based on our understanding of the market inputs used by the pricing services, all applicable investments have been valued in accordance with GAAP. We do not adjust prices obtained from pricing services. The following is a description of the valuation techniques and inputs used to determine fair values for financial instruments carried at fair value, as well as the general classification of such financial instruments pursuant to the valuation hierarchy.

Fixed maturities
We use pricing services to estimate fair value measurements for the majority of our fixed maturities. The pricing services use market quotations for fixed maturities that have quoted prices in active markets; such securities are classified within Level 1. For fixed maturities other than U.S. Treasury securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements using their pricing applications or pricing models, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. Additional valuation factors that can be taken into account are nominal spreads, dollar basis, and liquidity adjustments. The pricing services evaluate each asset class based on relevant market and credit information, perceived market movements, and sector news. The market inputs used in the pricing evaluation, listed in the approximate order of priority include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each input is dependent on the asset class and the market conditions. Given the asset class, the priority of the use of inputs may change, or some market inputs may not be relevant. Additionally, fixed maturities valuation is more subjective when markets are less liquid due to the lack of market based inputs (i.e., stale pricing) and may require the use of models to be priced. The lack of market based inputs may increase the potential that an investment's
estimated fair value is not reflective of the price at which an actual transaction would occur. The overwhelming majority of fixed maturities are classified within Level 2 because the most significant inputs used in the pricing techniques are observable. For a small number of fixed maturities, we obtain a single broker quote (typically from a market maker). Due to the disclaimers on the quotes that indicate that the price is indicative only, we include these fair value estimates in Level 3. 

Equity securities
Equity securities with active markets are classified within Level 1 as fair values are based on quoted market prices. For equity securities in markets which are less active, fair values are based on market valuations and are classified within Level 2. Equity securities for which pricing is unobservable are classified within Level 3.

Short-term investments
Short-term investments, which comprise securities due to mature within one year of the date of purchase that are traded in active markets, are classified within Level 1 as fair values are based on quoted market prices. Securities such as commercial paper and discount notes are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity, and as such, their cost approximates fair value. Short-term investments for which pricing is unobservable are classified within Level 3.

Other investments
Fair values for the majority of Other investments including investments in partially-owned investment companies, investment funds, and limited partnerships are based on their respective net asset values or equivalent (NAV) and are excluded from the fair value hierarchy table below. Certain of our long-duration contracts are supported by assets that do not qualify for separate account reporting under GAAP. These assets comprise mutual funds, classified within Level 1 in the valuation hierarchy on the same basis as other equity securities traded in active markets. Other investments also include equity securities, classified within Level 1 and fixed maturities, classified within Level 2, held in rabbi trusts maintained by Chubb for deferred compensation plans and supplemental retirement plans and are classified within the valuation hierarchy on the same basis as other equity securities and fixed maturities.

Securities lending collateral
The underlying assets included in Securities lending collateral in the Consolidated balance sheets are fixed maturities which are classified in the valuation hierarchy on the same basis as other fixed maturities. Excluded from the valuation hierarchy is the corresponding liability related to Chubb’s obligation to return the collateral plus interest as it is reported at contract value and not fair value in the Consolidated balance sheets.

Investment derivative instruments
Actively traded investment derivative instruments, including futures, options, and forward contracts are classified within Level 1 as fair values are based on quoted market prices. The fair value of cross-currency swaps and interest rate swaps is based on market valuations and is classified within Level 2. Investment derivative instruments are recorded in either Other assets or Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets.

Other derivative instruments
We maintain positions in exchange-traded equity futures contracts designed to limit exposure to a severe equity market decline, which would cause an increase in expected claims and, therefore, an increase in future policy benefit reserves for our guaranteed minimum death benefits (GMDB) and an increase in the fair value liability for our guaranteed living benefits (GLB) reinsurance business. Our positions in exchange-traded equity futures contracts are classified within Level 1. The fair value of the majority of the remaining positions in other derivative instruments is based on significant observable inputs including equity security and interest rate indices. Accordingly, these are classified within Level 2. Other derivative instruments based on unobservable inputs are classified within Level 3. Other derivative instruments are recorded in either Other assets or Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets.

Separate account assets
Separate account assets represent segregated funds where investment risks are borne by the customers, except to the extent of certain guarantees made by Chubb. Separate account assets comprise mutual funds classified within Level 1 in the valuation hierarchy on the same basis as other equity securities traded in active markets. Separate account assets also include fixed maturities classified within Level 2 because the most significant inputs used in the pricing techniques are observable. Excluded from the valuation hierarchy are the corresponding liabilities as they are reported at contract value and not fair value in the Consolidated balance sheets. Separate account assets are recorded in Other assets in the Consolidated balance sheets.
Guaranteed living benefits
The GLB arises from life reinsurance programs covering living benefit guarantees whereby we assume the risk of guaranteed minimum income benefits (GMIB) associated with variable annuity contracts. GLB’s are recorded in Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets. For GLB reinsurance, Chubb estimates fair value using an internal valuation model which includes current market information and estimates of policyholder behavior. All of the treaties contain claim limits, which are factored into the valuation model. The fair value depends on a number of factors, including interest rates, equity markets, credit risk, current account value, market volatility, expected annuitization rates and other policyholder behavior, and changes in policyholder mortality. Because of the significant use of unobservable inputs including policyholder behavior, GLB reinsurance is classified within Level 3.

Financial instruments measured at fair value on a recurring basis, by valuation hierarchy
September 30, 2021Level 1Level 2Level 3Total
(in millions of U.S. dollars)
Assets:
Fixed maturities available for sale
U.S. Treasury / Agency$1,786 $501 $ $2,287 
Non-U.S. 25,267